China overtakes India as world’s biggest gold buyer

LauraClarke

YueLi

Gold’s wild ride has shaken investors. But in China, buyers just keep stepping up to the plate.

Chinese demand for gold bars, coins and jewelry soared by 32% to record levels in 2013, even as the price of gold slumped 28%.

The surge in buying saw China overtake India as the world’s top consumer of physical gold, importing 1,066 metric tons of the metal to India’s 975 metric tons in 2013, according to new data from the World Gold Council. (A metric ton is equal to about 2,240 pounds.)

In India, consumption increased by 13% but further growth was curbed by import restrictions aimed at narrowing the country’s current-account deficit. The council estimates around 200 metric tons was smuggled into the country.

China’s lead over India as the world’s top importer is likely to be sustained, said Marcus Grubb, the council’s managing director of investment strategy.

“China is 10 years behind India in terms of deregulation and growth of demand,” Mr. Grubb said. “Given last year was such a strong year, it will be hard to equal that again in 2014, [but] the stock of gold in China is less than half of that in India, so we think there’s plenty more room to grow.”

The sharp rise in Chinese consumption partially offset a steep fall in gold demand elsewhere. While global sales of gold bars, coins and jewelry grew by 21%, gold-backed exchange-traded funds liquidated 51% of their gold holdings, putting 800 metric tons of the metal back on the market. The result was a net year-over-year decline in global gold demand of 15%, according to the gold council report.

Last year’s price slump contributed to a 2% fall in global gold supply, according to the report from the council, which is funded by mining companies. The supply of gold from mining companies increased 5% last year, but gold recyclers held back bringing their metal to market at depressed prices.

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